Of Attorney Flat Fees and the Minnesota Rules.

When considering hiring an attorney, it is important for the prospective client to understand what is expected before signing that engagement agreement. How a practitioner is compensated depends on a number of factors, including the nature of their practice, the complexity of the case, and so forth. Attorney fees are governed by Rule 1.5 of the Minnesota Rules of Professional Conduct.

One common means of attorney compensation is the hourly fee. The practitioner charges an hourly rate for time spent providing legal services to the client, and may also bill separate hourly rates for services of other professionals (such as paralegals, expert witnesses, etc.) who are needed in furtherance of the case. There may be different hourly rates for different services. In addition, there may be fixed expenses that are billed to the client, such as filing fees, court costs, incurred expenses, etc.

The practitioner may bill the client periodically along the way by invoice, or they may require that a certain sum be paid up-front: a retainer. The retainer funds are immediately deposited into a client trust account (CTA), or an IOLTA account. Those funds cannot be "commingled" (mixed) with any other funds. The practitioner bills against the retainer. If the case becomes more complex, and the agreement provides for additional funding, the practitioner may require the client to pay more into the retainer account. Conversely, if there are funds remaining in the retainer account when the matter has been completed, the practitioner must refund that unused amount to the client.

In the world of estate representation, practitioners engaged in probate administration--the process of closing a deceased person's estate through the probate process--typically bill hourly, and those rates depend on the complexity of the case, size of the estate, experience of the attorney, etc.

Another form is the contingency fee--the "you don't pay unless we win" method. This is frequently used by practitioners representing plaintiffs pursuing damages in tort cases, such as personal injury. If the plaintiff prevails at trial and receives a jury award, or if the opposing party agrees to pay a settlement, the plaintiff attorney collects a pre-agreed-upon percentage of the award or settlement, plus any other fees or expenses as set forth in the retainer agreement.

However, those of us who practice in the area of crafting estate-planning documents (myself included), tend to charge flat fees for legal services. As the name implies, a flat fee is simply an agreed-upon, fixed dollar figure to be paid by the client for the performance of certain legal services, such as drafting a will or power of attorney. Estate-planning attorneys typically require half or all of the flat fee in advance before starting the representation.

After having consulted with the client, the practitioner will give a quote for the services requested by the client. If the practitioner and client agree to representation, the client will be asked to sign an engagement agreement. Before the client signs, it is very important for them to thoroughly read and understand what is expected in the engagement agreement. The attorney has an obligation to explain this up-front; nevertheless, it is incumbent upon the prospective client to ask questions if there is any doubt.

There are some specific rules about flat fees, and the Minnesota Rules set those out.

Fee agreements cannot claim any fee to be non-refundable, or earned upon receipt. Naturally, it would be unfair for a practitioner to collect a fee and keep it if, for some reason, either party doesn't go ahead with the representation.

However, the agreement may claim the fee as an advance fee as the attorney's property--subject to refund.

In order for the attorney to charge a flat fee as an advance fee subject to refund, the attorney must notify the client in writing of five things:

1. The nature and scope of services provided;

2. the total amount of the fee and terms of payment;

3. that the fee will not be held in a trust account until earned;

4. that the client has the right to terminate the attorney-client relationship; and

5. that the client will be entitled to a refund of all or a portion of the fee if the agreed-upon legal services are not provided.

Here's how it works.

Example: An attorney requires the client to pay a $1000 fee in advance for her legal services drafting some documents. The attorney cannot claim that any of the $1000 fee is non-refundable, nor can she claim any of it as property of her or her firm. Makes sense, right? She hasn't earned the fee yet. However, the attorney can state that the $1000 is an advance fee payment, subject to refund. In other words, if either the attorney or her client chooses to end the representation, for whatever reason, the attorney is obligated to refund the client's advance fee--minus whatever portion of the advance fee the attorney has earned up to that point by her representation. If, in this example, the attorney had rendered some legal services in furtherance of the client's case, like doing research or drafting documents, she would be well within her right to keep a portion of the advance fee for those services. If the client disputes this, the attorney must take reasonable and prompt action to resolve the dispute.

When selecting an attorney to provide representation, it is important for the client to be fully informed before entering in an engagement agreement. A thoughtful attorney will state what will happen going forward, and should fill in all the blanks. But a wise client will ask for clarifications, if needed.